September 16, 2008
Win Smith '71 on the Merrill Lynch sale
Monday was a remarkable day in what is turning out to be a remarkable week (and year) on Wall Street. Lehman Brothers, which started as a dry goods store in Alabama in 1850 and eventually evolved into a globally recognized investment bank, filed for Chapter 11 bankruptcy protection. Our friends over at EphBlog reflected on the Williams connection to Lehman Brothers
Perhaps more stunning was the news that Merrill Lynch, one of the worlds preeminent investment banks (and my first employer after Amherst!), was sold to Bank of America.
Merrill is a company with deep Amherst ties. It’s founder, Charles E. Merrill ‘08, attended Amherst for two years before enrolling in the law school at the University of Michigan (Incidentally, Charles Merrill was the father of the noted poet James Merrill ‘47).
While even people distant from the financial world have heard of Merrill Lynch, few know that the full name of the company is Merrill Lynch, Pierce, Fenner & Smith Inc. The “Smith” in that list is Winthrop H. Smith ‘16, who eventually served as the managing partner at the firm from 1940 until his death in 1961.
His son, Winthrop H. (Win) Smith, Jr. ‘71, was also a high level executive at Merrill Lynch, serving as the Chairman of Merrill Lynch’s international businesses. He retired in 2001 after E. Stanley O’Neal was elevated to chairman and CEO of the Company (O’Neal was replaced by John Thain in 2007 after Merrill’s tremendous losses in the sub-prime mortgage market were revealed). I had the pleasure of meeting Win Smith once, when I first arrived at Merrill as a summer intern, as he regularly carved out time to meet individually with Amherst students and alumni who were new to the company. It was easy to see why Win Smith was genuinely respected and liked throughout Merrill Lynch by those who came in contact with him. I recall several managers in my end of the company privately expressing disappointment when Smith was not chosen to succeed David Komansky as chairman and CEO.
Smith appeared on CNBC just hours after the sale was announced. In an interview with Maria Bartiromo, he pulled no punches:
SMITH: … and, frankly, I feel a lot of anger. I feel a lot of anger for the former CEO Stan O’Neal, and for the board of directors, who really acted incredibly irresponsibly and got us into this position and dealt John [Thain] the hand that he was dealt today.
BARTIROMO: … Where did Stan O’Neal go wrong and the board of directors at Merrill Lynch?
SMITH: Well, I think it started really day one …
Watch the whole thing. Smith goes through a laundry list of things that went wrong, including the failure of the company’s management to act back in 2006, when it became evident Merrill Lynch was overexposed to certain markets.
Smith also mentioned that it was a sad day. While most people probably feel little sympathy for the plight of banks in the current market (and understandably so), there is something sad about seeing a company such as Merrill, which was really built from the ground up by people like Charles Merrill and Winthrop Smith, Sr., succumb due to the poor stewardship of those entrusted with running the operations. I feel a little bummed too: While Merrill was never perfect, it was a great place for a young trader to work and learn. Merrill also took great pride in its independence as its rivals, such as Salomon Brothers and JP Morgan, combined with commercial banks in the wake of the Gramm Leach Bliley Act.
It’s also a surprise. Merrill, while taking its lumps, had always been good in navigating through rough waters. While Merrill had suffered severe losses recently, most expected the company to make it through after John Thain purged most, if not all, of the company’s bad exposure. In the end, the Stan O’Neal management’s appetite for risk was not tempered with any modicum of prudence and John Thain was probably wise to entertain a well-capitalized buyer. Bank of America, for years longing to be a player in the global capital markets, was the clear winner on the day.
Hat tip: Bess Levin ‘06 at Dealbreaker
UPDATE 9/22: Josh Glasser ‘10 also noted the sale of Merrill Lynch in the Student with a nice biographical piece on Charles E. Merrill.
Dave Nardolillo '98 | September 16, 2008 02:34 AM | Alumni | History
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